Employee Equity Incentive Plans

6 Months Ended

Mar. 31, 2013

Employee Equity Incentive Plans [Abstract]

EMPLOYEE EQUITY INCENTIVE PLANS

9. EMPLOYEE EQUITY INCENTIVE PLANS

The Company currently has three equity incentive plans under which awards are outstanding (the “Plans”), one of which is currently in active use as described below. The Plans are: the 2005 Equity Incentive Plan (the “2005 Plan”), the 2003 Equity Incentive Plan (the “2003 Plan”) and the 2000 Stock Option Plan (the “2000 Plan”), which are described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2012. All of the Plans were approved by the stockholders, except for the 2003 Plan, which was approved solely by the Board of Directors. Share-based awards are subject to terms and conditions established by the Compensation Committee of the Company’s Board of Directors. The Company’s policy is to issue new common shares upon the exercise of stock options, conversion of restricted share units or purchase of restricted stock.

During the six month periods ended March 31, 2013 and 2012, the Company granted share-based awards under both the 2003 Plan and the 2005 Plan. Under the 2003 Plan and the 2005 Plan, options to purchase shares, restricted stock units, restricted stock and other share-based awards may be granted to the Company’s directors, employees and consultants. Effective March 2013, the Company is no longer able to issue grants from the 2003 Plan. Pursuant to the provisions of annual increases of the 2005 Plan, the number of authorized shares of common stock for issuance increased by 325,000 shares effective November 15, 2012. As of March 31, 2013, the Company had an aggregate of 13,515,843 shares of its common stock reserved for future issuance. Of those shares, 12,511,461 shares were related to outstanding options and other awards and 1,004,382 shares were available for future grants of share-based awards. As of March 31, 2013, no equity awards were outstanding to consultants. The Company may also, from time to time, issue share-based awards outside of the Plans to the extent permitted by NASDAQ rules. As of March 31, 2013, there were no equity awards that were issued outside of the Plans (inducement option grants) outstanding. None of the share-based awards are classified as a liability as of March 31, 2013.

Stock Options. Stock options are granted with an exercise price equal to the current market price of the Company’s common stock at the grant date and have 10-year contractual terms. For option grants to employees, generally 25% of the option shares vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the option shares vest and become exercisable quarterly in equal installments thereafter over three years. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans).

Summaries of stock options outstanding and changes during the six months ended March 31, 2013 are presented below.

	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value
Outstanding, September 30, 2012		8,142,468		$	2.67
Granted		1,859,107		$	2.64
Exercised		(389,781	)	$	1.39
Forfeited		(187,091	)	$	3.37
Outstanding March 31, 2013		9,424,703		$	2.71		7.6	$	5,313,772
Vested and expected to vest in the future, March 31, 2013		9,072,526		$	2.71		7.5	$	5,218,502
Exercisable, March 31, 2013		4,346,368		$	2.68		6.5	$	3,696,086

The weighted average grant-date fair value of options granted during the six month periods ended March 31, 2013 and 2012 was $1.79 and $1.59 per share, respectively. The total intrinsic value of options exercised during the six month periods ended March 31, 2013 and 2012 was approximately $576,000 and $1.8 million, respectively, based on the differences in market prices on the dates of exercise and the option exercise prices. As of March 31, 2013, the total unrecognized compensation cost related to unvested options was approximately $9.8 million which is expected to be recognized over the weighted-average period of 2.8 years, based on the vesting schedules. No tax benefit was realized for the tax deductions from option exercise of the share-based payment arrangements in the six month periods ended March 31, 2013 and 2012.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model, which uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s common stock and other factors. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The expected risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future.

Assumptions used in the Black-Scholes model for options granted during the six months ended March 31, 2013 were as follows:

Expected volatility	83%-84%
Expected term in years	5.4
Expected risk-free interest rate (zero coupon U.S. Treasury Note)	0.8%-0.9%
Expected dividend yield	0%

Restricted stock units (“RSU”). RSUs granted to employees generally vest based on three or four years of continuous service from the date of grant. RSUs granted to non-employee directors generally vest over the term of one year from the grant date and are not released until the awardee’s termination of service. Vesting for non-employee director grants allow for accelerated vesting of RSUs in the case of a non-employee director’s resignation where either: (i) he/she has served for at least four years as a member of the Board and is in good standing at the time of resignation, or (ii) he/she resigns for reasons related to health or family matters and is otherwise in good standing at the time of resignation.

The following table summarizes the RSU activities for the six months ended March 31, 2013:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested, September 30, 2012		1,016,624		$	2.23
Granted		1,166,301		$	2.65
Vested		(237,335	)	$	3.07
Forfeited		(21,297	)	$	2.24
Unvested, March 31, 2013		1,924,293		$	2.38

The grant-date fair value of RSUs granted during the six month periods ended March 31, 2013 and 2012 was approximately $3.1 million and $2.1 million, respectively. As of March 31, 2013, the total unrecognized compensation cost related to unvested shares was approximately $3.7 million which is expected to be recognized over a weighted-average period of 3.0 years, based on the vesting schedules.

At March 31, 2013, there were 1,162,465 shares of restricted stock with a weighted-average grant date fair value of $2.01 per share awarded to directors that have vested but are still restricted until the director resigns.

Performance RSUs. During the six months ended March 31, 2013, the Company granted performance RSUs to purchase 325,434 shares of common stock from the 2003 Stock Option Plan. The performance RSUs are included in the above unvested RSU table. The RSUs have a performance goal related to fiscal 2013 revenue that determines when vesting begins and the actual number of shares to be awarded ranging from 0% to 100% of target. Vesting is over three years beginning on the date the performance goal is achieved (“Achievement Date”), with 50% of the RSU shares vesting on the first anniversary of the Achievement Date and the remaining 50% of the RSU shares vesting annually in equal installments thereafter over two years. At March 31, 2013, the performance goal had not been met and 321,434 performance RSUs were outstanding.

Additionally, during fiscal 2012, the Company granted performance RSUs to purchase 30,000 shares of common stock from the 2003 Stock Option Plan. The performance RSUs are included in the above unvested RSU table. The RSUs have a performance goal related to revenue that determines when vesting begins and the actual number of shares to be awarded ranging from 0% to 100% of target. Vesting is over 4 years beginning on the Achievement Date, with 25% of the RSU shares vesting on the first anniversary of the Achievement Date and the remaining 75% of the RSU shares vesting quarterly in equal installments thereafter over three years. At March 31, 2013, the performance goal had not been met and all 30,000 performance RSUs were outstanding.